ACCY 131

Blackwell Manufacturing is headquartered in Houston, Texas. For which of the following reasons might the city be users of Blackwell's financial statements?

A All of the choices are correct. B To determine how grant funds have been spent C To determine if Blackwell is complying with regulations D To determine if Blackwell is paying its fair share of taxes AAAAAAA

Which of the following would best meet the requirements of independence for assurance services?

A CPA from Capital City, An Independent Audit and Assurance Services Firm

Which of the following best describes the independence requirements for a close relative of a covered member?

A close relative cannot hold a key position with an audit client

What is the difference between a compliance audit and an operational audit?

A compliance audit is an audit to determine whether the entity has conformed with regulations, rules, or processes, whereas an operational audit is an assessment of the economy, efficiency and effectiveness of an organization's operations.

Once it has been determined that a specialist is required, the next step is for the auditors to determine the scope of the work to be carried out and agreed to by the specialist. Which of the following represents the "best" approach for recording this agreement?

A formal engagement letter with the specialist.

According to the profession's ethical standards, an auditor would be considered independent in which of the following instances?

A professional employee, who does not work on the audit, has a spouse who is a marketing manager for an audit client.

Under the AICPA ethics rules on independence, which of the following individuals would not be a covered member?

A tax partner in another office who provides 9 hours of tax services to the audit client

During the audit of Smithfield Muffins, the auditors tested purchase invoices to determine that invoiced amounts have been recorded appropriately. Which assertion was the auditor most likely addressing?

Accuracy

Unauthorized access to data can occur when

All of the choices are correct. B application software is being used that can result in either fraud or misstatements in the financial statements. C there is insufficient security or poor password protection procedures. D data is being entered that can be lost or distorted.

Which of the following statements is true about interpretations of the AICPA Code of Professional Conduct?

An AICPA member who departs from an interpretation has the burden of justifying a departure in any disciplinary hearing.

Which of the following is considered tracing?

An auditor selects a sample of vendor invoices and follows them through to the accounting records.

Which of the following is the LEAST likely to be true regarding an internal auditor?

An external auditor may not rely on the work of the internal auditor.

What is the difference between an integrated audit and a compliance audit?

An integrated audit is an audit that combines the financial statement audit with an audit of the effectiveness of internal controls over financial reporting (ICFR), whereas a compliance audit is an audit to determine whether the entity has conformed with regulations, rules, or processes.

Which of the following statements is correct regarding analytical procedures?

Analytical procedures are important to the auditor because they allow the auditors to compare their own expectations to the client's performance by analyzing relationships between data, both financial and non-financial.

The Public Company Accounting Oversight Board (PCAOB) has authority to establish which of the following relating to public companies?

Attestation standardsIndependence standards YesYes

Which of the following is NOT an example of a time or cost constraint that an auditor may face when conducting an audit?

Audit industry guidelines require auditors to discover all misstatements.

Which of the following is required by PCAOB Standard 2201?

Auditors must conduct an integrated audit for public companies.

Bob Smith is an intern working on the audit of XYZ Enterprises. What is true regarding the audit working papers Bob prepares?

Bob should initial the work paper together with the date the work paper was prepared.

Complete the following sentence found in the opinion paragraph on the audit of internal control over financial reporting: In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by

COSO.

Without the consent of the client, a CPA should not disclose confidential client information contained in working papers to a

CPA firm that is a likely successor auditor

During the audit of LAX Sticks, auditors found $10,000, which had been erroneously recorded as miscellaneous expense instead of fixed assets. Which assertion is most likely affected?

Classification

CleteCorp has an inventory turnover in days of 62 in 2018 as compared to 60 in 2017 and an industry average of 55. What does this indicate about CleteCorp?

CleteCorp is doing a worse job of selling their inventory than both the prior year and the industry average

CleteCorp has a gross profit margin of 50% in 2018 as compared to 52% in 2017 and an industry average of 48%. What does this indicate about CleteCorp?

CleteCorp's gross profitability has declined, however, CleteCorp's gross profitability is still better than the industry average.

If a management team needs to confirm best practices in designing internal control systems, they should consult the

Committee on Sponsoring Organizations of the Treadway Commission (COSO).

Gene Cosby is an IRS agent. He is currently gathering evidence regarding the income tax deductions of G&M Operations, Inc. Which type of audit is Gene most likely working on?

Compliance audit

Which of the following would most likely be included in the current file of the Fowlerville Family Restaurant audit?

Confirmation letters

During the audit of Transport Trucking, the auditors performed testing to determine that purchase transactions have been recorded in the correct accounting period. Which assertion was the auditor most likely addressing?

Cutoff

A client sells laptops that have experienced returns for faulty screen controls. When evaluating inherent risk, all of the following are inherent risks to consider, EXCEPT

Decision to repair instead of replace laptops

Luigi Deltorio is auditing the accounts receivable of Bricksburg Corp. Luigi has assessed the risk of material misstatement as low. As a result, detection risk is set at high and the level of audit evidence required is

Decreased

During the audit of JPG Enterprises, you discover that the industry has low risk of technological obsolescence. Which factor that influences inherent risk does this primarily relate to?

Demand

Which of the following would most likely be included in the current file of the Vacher Chemical audit?

Details of testing performed

Which component of audit risk can the auditor control?

Detection risk.

Which of the following statements is incorrect regarding internal controls?

Effective internal controls over financial reporting provides no assurance regarding the reliability of financial reporting and the preparation of financial statements for internal purposes.

The phrase "generally accepted accounting principles" is an accounting term that

Encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.

Assurance services are provided only by qualified accounting firms.

False

Auditors may or may not determine the risk associated with the client's closing procedures

False

Which of the following statements is most correct regarding integrated audits?

For efficiency purposes, auditors will select audit procedures that allow them to gather evidence that is useful to both of the audits. and Using professional judgment, auditors select the most critical internal controls over financial reporting and test the effectiveness of those controls.

Which of the following is NOT an example of an applicable financial reporting framework that can be considered as guidance for the preparation of financial statements?

Generally accepted audit standards (GAAS)

You are auditing the financial statements of ChemCom Enterprises. You are concerned that management may override controls when preparing adjusting and allocating entries, due to the immense pressure to meet earnings targets. Who has responsibility for oversight of this process?

Governance

Which of the following describes why an auditor should consider a client's discounting policies as an inherent risk factor?

Inappropriate discounting policies may put profit margin at risk.

If auditors believe their client is under pressure to smooth its income and not report any unexpected increases, which of the following risks are likely with regard to current income? Select all that apply.

Inclusion of expenses incurred after year-end Exclusion of revenues earned just before year-end

Mountain Matcha, a maker of beverages, has taken on more debt this year for capital investments as the company expands and opens new stores. As an auditor, you are concerned with the amount of pressure this has placed on senior management. Which of the following is a valid reason for why you might be concerned?

Inherent risk and potential fraud

Susan Campbell is an employee of HLC Building, Inc. She is currently evaluating and improving risk management for the construction division. Which type of audit is Susan most likely working on?

Internal audit

An attestation engagement is one in which a CPA is engaged to

Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party.

Which of the following are functions of the State Boards of Accountancy? Select all that apply.

Issuing CPA licenses to individuals who meet all the requirements Adopting and enforcing rules of professional conduct for CPAs Adopting and enforcing rules regarding continuing professional education requirements

Under the Sarbanes-Oxley Act of 2002, which of the following is not a stated responsibility of the Public Company Accounting Oversight Board?

Issuing accounting standards that must be followed by issuers in financial reporting.

Which of the following statements regarding performance measurement is correct?

It is inappropriate to assume a client will use the same KPIs every year.

During the audit of cash for Viable Publishing Co. audit, the auditor determines that he needs to revisit the test work performed on the bank reconciliation. Where should the auditor look for the document?

Lead Sheet

Which of the following describes areas of financial documentation that are most appropriate to be assigned to internal auditors?

Less materiality, lower risk of material misstatement, and less subjectivity

You are an auditor and you discover during a conversation with a key employee that a significant volume of transactions is with a vendor owned by the spouse of a member of the management team. Which of the following specific audit procedures would least likely be helpful?

Life Insurance Policies

During the audit of CleteCorp, auditors determine that the PE and EPS ratios are in decline. What is the auditor's most likely concern in relation to the decline of those ratios?

Management is under pressure to manipulate earnings.

Section 404 of the Sarbanes-Oxley Act of 2002 requires each annual report of an issuer to include which of the following?

Management's assessment of the effectiveness of internal control over financial reporting.

Marcus Struthers is on the board of directors for Camp, Inc.; however, Marcus is not part of the management team for Camp, Inc. Marcus would be considered which of the following?

Non-executive director

Which of the following statements is true regarding observation?

Observation only provides evidence of a process at the time auditors observe it being carried out.

Which type of audit assesses the economy, efficiency and effectiveness of an organization's operations?

Operational audit

Which of the following is true of material weaknesses?

PCAOB AS 2201 dictates how auditors would modify the audit report to express an adverse opinion.

In the title of the audit report on the effectiveness of ICFR, the term registered is required to indicate that the firm is registered with the

PCAOB.

You are auditing the financial statements of Pokogo Enterprises. What should you do if you believe Pokogo is under pressure to report strong results, such that there is risk that revenues earned after year-end may be included in the current year's income?

Perform sales cutoff procedures.

A major stockholder paying back a loan at period end, and the company lending the same amount of money back to the stockholder shortly after the quarter ends, is an example of which of the following?

Period-end window dressing

You are auditing the financial statements of POKOGO Enterprises. In addition to the annual financial statements, POKOGO prepares monthly financial statements for internal purposes. You have decided to check these statements to assess the accuracy of their closing procedures. What should you do if there are significant issues, where closing procedures are inadequate, and transactions are not always recorded in the appropriate reporting period?

Plan to spend more time conducting detailed testing of transactions and balances around year-end

A company's internal control over financial reporting includes which of the following policies and procedures? Select all that apply.

Policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements B Policies and procedures that provide reasonable assurance that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company C Policies and procedures that pertain to the maintenance of records D Policies and procedures that provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles

During the audit of Shu Inc., Jeffrey Dobby has assessed the risk of material misstatement for accounts receivable as low. He has gathered sufficient appropriate audit evidence that internal controls are effective. The population of accounts receivable consists of a small number of large account balances. Jeffrey expects a low exception rate and is not aware of any circumstances that would cause the recipients to disregard the information? Which type of confirmation should Jeffrey use?

Positive

Which of the following best describes being alert to conditions that may indicate possible misstatement due to fraud or error?

Professional skepticism

The independent auditor's plan for an examination in accordance with generally accepted auditing standards is influenced by the possibility of material misstatements. The auditor will therefore conduct the examination with an attitude of

Professional skepticism.

Generally accepted auditing standards are

Pronouncements issued by the Auditing Standards Board.

Which of the following is not a primary responsibility of an auditor:

Provide management with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

A financial statement audit report issued for a public company states that the audit was performed in accordance with which of the following standards?

Public Company Accounting Oversight Board standards.

In the United States, how do public companies differ from private companies in audit requirements?

Public companies but not private companies are required to have an annual financial audit.

Assume you are on the audit team for a medical care product manufacturer whose product is suspected of creating additional health problems for its users and the company is experiencing public relations issues, product returns, and lawsuits as a result. All of the following are accounts and notes disclosures that your team should review carefully, EXCEPT

Purchase discounts

Which of the following is NOT a key component of an unqualified report on internal control over financial reporting?

Reasonable assurance paragraph

Lucas Roberts is auditing the accounts receivable of Smithway Marina. Lucas is trying to ensure his audit evidence supports the existence assertion. Which characteristic of audit evidence is Noah concerned with?

Relevance

Noah Piel is auditing the notes payable of Chesterton Bakery. Noah is trying to ensure he obtains evidence provided by original documents rather than copies. Which characteristic of audit evidence is Noah concerned with?

Reliability

What type of engagement is performed by a practitioner to provide limited assurance that financial statements need no material modifications?

Review

During the audit of Thompson Trucking, Corp., the auditors inspected purchase contracts for several trucks to determine ownership. Which assertion was the auditor most likely addressing?

Rights and obligations

A large, profitable social media client has hired you to perform an audit of the company's financials. The client has briefed you on some of the firm's key performance indicators. Which of the following is likely NOT one of the social media client's KPIs?

Sales per passenger mile

That management accepts responsibility for the design and maintenance of internal controls is a requirement stated in Section 404 of the

Sarbanes-Oxley (SOX) Act.

The organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public is the:

Securities and Exchange Commission.

It is important that a client has appropriate procedures for which of the following regarding installation of a new IT system? Select all that apply.

Selecting new IT systems Training staff in using the new system Changing from an existing system to a new system

Which of the following statements is most accurate regarding the work of internal auditors?

Since internal auditors are employees of the client, they are not independent.

Which of the following statements regarding corporate governance is correct?

Some private companies may not have an audit committee or even a board of directors.

A CPA being contacted about potential disciplinary action or revocation of his or her CPA license would likely hear from which of the following entities?

State board of accountancy

If a CPA suspects that he or she might lack specialized training required to conduct an audit appropriately, he or she should consult rules promulgated by the

State board of accountancy.

According to FASB ASC Topic 850, Related Party Disclosures, related parties would NOT include which of the following?

Stockholders of the entity and their immediate family members

Al Greensburg is auditing the cash account for XYZ Enterprises. Al is determining his sample size. Which characteristic of audit evidence is Al concerned with?

Sufficiency

Shawn Johnson is interested in determining whether Fix It Company can pay for the goods it has received. Shawn is most likely which type of financial statement user?

Supplier

Which of the following circumstances most likely would cause an auditor to consider whether material misstatements exist in an entity's financial statements?

Supporting records that should be readily available are frequently not produced when requested. eTextbook and Media

Dandy Container Corporation engaged the accounting firm of Adams and Adams to audit financial statements to be used in connection with a public offering of securities. The audit was completed, and an unqualified opinion was expressed on the financial statements that were submitted to the Securities and Exchange Commission along with the registration statement. Two hundred thousand shares of Dandy Container common stock were offered to the public at $11 a share. Eight months later, the stock fell to $2 a share when it was disclosed that several large loans to two "paper" corporations owned by one of the directors were worthless. The loans were secured by the stock of the borrowing corporation that was owned by the director. These facts were not disclosed in the financial statements. The director involved and the two corporations are insolvent.

TRUE 1.The Securities Act of 1933 applies to the above-described public offering of securities in interstate commerce.select an option. TRUE 2.The accounting firm has potential liability to any person who acquired the stock in reliance on the registration statement.select an option TRUE 3.The accountants could avoid liability if they could show they were neither negligent nor fraudulent.select an option TRUE 4.The accountants could avoid or reduce the damages asserted against them if they could establish that the drop in price was due in whole or in part to other causes.select an option TRUE 5.The Dandy investors would have to institute suit within one year after discovery of the alleged untrue statements or omissions.select an option TRUE 6.The SEC would defend any action brought against the accountants in that the SEC examined and approved the registration statement.select an option FALSE 7.Although Adams and Adams knew of the loans, and related collateral, and concluded that they did not need to be disclosed, they can still sustain the claim that they are only proportionally liable for any damages suffered by shareholders because the financial statements are management's responsibility. FALSE

An independent auditor must have which of the following?

Technical training that is adequate to meet the requirements of a professional.

What distinguishes the AICPA's Auditing Standards Board (ASB) from the PCAOB?

The ASB issues auditing standards for private and non-profit companies and the PCAOB oversees audits of public companies.

When a plaintiff is suing the auditor for damages under Rule 10(b)-5 of the 1934 Securities Act, which of the following is not part of the plaintiff's burden of proof?

The auditor was negligent.

During the audit of Marcella Stores, the auditors determine that internal controls over inventory security are weak. What should the auditors do?

The auditors should rely less on internal controls and adopt a substantive approach.

During the audit of Marci Stores, the auditors determine that internal controls over inventory security are weak. What should the auditors do?

The auditors should rely less on internal controls and adopt a substantive approach.

Which of the following statements is correct regarding the board of directors?

The board of directors represents the shareholders and is responsible for ensuring the company is being run to benefit the shareholders.

Which of the following is an example of a qualitative materiality factor?

The client is experiencing a slowdown in sales and is struggling to pay vendors on time

All of the following are correct statements regarding the use of a component auditor except for

The component auditors will establish the overall group audit strategy and communicate with the group engagement team.

What is the appropriate date for an audit report?

The conclusion of the gathering of evidence for the audit.

Which of the following underlies the application of generally accepted auditing standards, particularly the standards for obtaining sufficient appropriate audit evidence?

The elements of materiality and audit risk.

Which of the following statements is correct?

The group engagement partner will spend less time if the component auditor has a good reputation.

Which of the following is a risk associated with the installation of a new IT system?

The system may not be appropriate for the client and its reporting requirements. The new system may not process data appropriately. Data may be lost or corrupted when transferring information from an existing system to the new system.

Which of the following describes why an auditor may use internal performance reports to assess the risk of material misstatement?

To indicate which accounts might be most at risk for material misstatement B To understand the expectations of management and results compared to expectations C To compare performance between divisions and against budget D All of the choices are correct.

It is important that a client has appropriate procedures for which of the following regarding installation of a new IT system? Select all that apply.

Training staff in using the new system Changing from an existing system to a new system

During the audit of Niagara Backpacks, a private company, the auditors found an immaterial overstatement in the inventory account. Assuming no other issues were discovered during the audit, which type of audit report should be issued?

Unmodified

Which assertion relates to the following statement? "Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts".

Valuation

If an auditor selects a sales transaction from the journal and examines underlying source documents, it is considered which of the following?

Vouching

During the audit of JPG Enterprises, you discover that there is a history of poor product quality and goods being returned for the same problem. Which factor that influences inherent risk does this primarily relate to?

Warranties

Which of the following statements is INCORRECT regarding information technology?

When a client's staff develops a program, the program is less likely to have the features required, but there is no risk of errors if the program is written by experienced staff.

Which of the following statements is correct regarding the information generally included on a working paper?

Working papers should be initialed to identify the preparer of the working paper together with the date the working paper was prepared along with the reviewer and the date the working paper was reviewed.

A CPA who is a "covered person" purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Would the independence of the CPA be considered impaired with respect to the client?

Yes, because the stock would be considered a direct financial interest and, consequently, materiality is not a factor.

A CPA would violate the AICPA rule on integrity and objectivity if

a CPA in industry knowingly misrepresented the earnings of the company he worked for. a CPA in public practice represented both the buyer and seller in helping the parties negotiate the sale (purchase) of a business. a CPA who was an audit staff member subordinated his or her judgment to that of the audit partner.

Non-assurance services provided by an accounting firm might include (select all that apply)

a business valuation management consulting

tuart Smally is a member of the Toyco audit team. Stuart has 4 years of experience and performs detail testing. Stuart is most likely

a senior associate.

A similarity between the SEC and the PCAOB is that they both

act to protect the interests of investors.

Management for a public company of less than $75 million in market value is responsible for all of the following EXCEPT

an audit of the internal controls over financial reporting.

An attitude of professional skepticism means:

any indicator of fraud is properly investigated.

Both attestation and audit services fall under the broad term of _______ services.

assurance

The risk assessment phase of an audit does not include:

audit execution and reporting.

Which of the following is NOT generally included in an audit working paper?

audit fee

Assurance, attestation, and audit services are overlapping, with the most specific and narrow being _______ services, followed by _______ services, and with the broadest being _______ services.

audit; attestation; assurance

All of the following statements about audit opinions are true EXCEPT the

auditor's opinion on the financial statements is meant to be a predictor of the future success of the company.

Which of the following assertions are in the "assertions about classes of transactions and events for the period under audit" category?

completeness, cutoff, accuracy, occurrence, and classification

Appropriateness

considers audit evidence's reliability and relevance

Sufficiency

considers the quantity of audit evidence.

current ratio.

current assets / current liabilities

All of the following are potential indicators of increases in inherent risk and fraud risk EXCEPT

decreases in debt and interest expense.

Section 404 of the SOX legislation requires that management accept responsibility for the

design and maintenance of internal controls.

In the United States, a state board of accountancy issues a license to practice to aspirants who have

earned all three E's: education, exam, and experience.

Deb Fielder is the CFO for Datamart, Inc., a public company. What would Deb's position be in regard to the board of directors?

executive director

Starr Corp. approved a plan of merger with Silo Corp. One of the determining factors in approving the merger was the strong financial statements of Silo, which were audited by Cox & Co., CPAs. Starr had engaged Cox to audit Silo's financial statements. While performing the audit, Cox failed to discover material fraud, which subsequently caused Starr to suffer substantial losses. For Cox to be liable under common law under the Ultramares decision, Starr, at a minimum, must prove that Cox:

failed to exercise due care.

If a stockholder sues a CPA for common law fraud based on false statements contained in the financial statements audited by the CPA, which of the following is the CPA's best defense?

he auditor followed GAAS.

Working papers are stored

in either the permanent file or the current file.

Revenue and expense items must _______ all transactions that occurred during the accounting period and _______ transactions that relate to other periods.

include; exclude

Mario Tomasso is auditing the property, plant, and equipment of Bricksburg Corp. Mario has assessed risk of material misstatement as high. As a result, detection risk is set at low and the level of audit evidence required is

increased

When auditors seek to understand various matters related to audit evidence, they use a technique called

inquiry

Public companies are required to have two audits every year. When they are performed together for efficiency, it is referred to as a(an) _______ audit.

integrated

Section 404 of the SOX legislation requires that management

issue a report each year asserting whether internal controls over financial reporting were effective.

As a result of a review engagement, the practitioner may express __________ that no material modifications need to be made to the financial statements.

limited assurance

The basis for opinion paragraph of an audit report over the effectiveness of ICFR states that the Company's _______ are responsible for maintaining effective internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting.

management

Section 404 of the SOX legislation requires that

management's claims about the effectiveness of ICFR must be audited by the independent external auditor.

In a conversation with a client, Marcie, a member of the audit team, discovers that the marketing agency used by the client is owned by the spouse of the VP of Operations. Recognizing this as a related party relationship, Marcie and the audit team must exercise professional skepticism and identify all of the following risks, EXCEPT

material risk.

The audit strategy known as the predominantly "substantive approach":

means the auditor will spend minimum effort testing the client's system of internal controls.

If internal controls are effective, then it is _____ likely that the financial statements will be free of material misstatements and errors.

more

The essence of the due care standard is that the auditor should not be guilty of

negligence.

In the _____ paragraph on the audit report on the effectiveness of ICFR, the first sentence explains that an audit of ICFR was conducted and references the COSO Internal Control-Integrated Framework as the criteria used as the basis for determining if ICFR are effective.

opinion

During the audit of Family Fitness Co., the auditor determines that he needs to view a copy of a contract for the lease of the building. Where should the auditor look for the document?

permanent files

Reliability

related to the authenticity of audit evidences

The audit strategy known as "reliance on controls approach":

requires the auditor to conduct extensive control testing.

Auditors can only provide reasonable assurance that the financial statements are presented fairly because:

sampling techniques are used to gather evidence. some items in the financial statements are subjective. an audit must be completed in a reasonable amount of time.

Obtaining positive results from testing controls means that:

the auditor can plan to reduce the reliance on detailed substantive testing of transactions and account balances.

If a prospective new audit client does not allow the auditor to contact its existing auditor:

the auditor should consider that a negative factor on the integrity of client management.

An example of an incentive or pressure that increases the risk of fraud is:

the client operates in a highly competitive industry. the client has a history of reporting losses. a significant percentage of management pay is tied to earnings.

A key aspect of the "concern for the public interest" definition of a professional is

the fact that there are situations where professionals must put the interest of society ahead of the interest of their clients or their own well-being

In the conceptual framework to the AICPA Code of Professional Conduct, a self-interest threat is:

the threat that a CPA could benefit, financially or otherwise, from an interest in, or a relationship with, a client or persons associated with the client.

One of the elements necessary to recover damages if there has been a material misstatement in a registration statement filed pursuant to the Securities Act of 1933 is that:

there was a material false or misleading statement in the financial statements.

An auditor will identify accounts and related assertions at risk of material misstatement:

to plan the audit to focus on those accounts.

Even though internal controls may be considered effective, it does not mean they will prevent all misstatements or errors from affecting the financial statements.

true

The reason SOX requires an audit of internal controls is because effective ICFR provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

true

According to AU-C 610 Using the Work of Internal Auditors and AS 2605 Consideration of the Internal Audit Function, auditors may

use the work of internal auditors in gathering audit evidence and use internal auditors to provide direct assistance under the direction, supervision, and review of the external auditors.

Which assertion relates to the following statement? "Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts".

valuation

AU-C 230 Audit Documentation and AS 1215 Audit Documentation require auditors to document each stage of the audit in their working papers to provide a record of

work completed and evidence gathered in forming their audit opinion.